A Kentucky bank company that lost a lucrative processing contract after selling a money-order subsidiary last year has won a little payback.
Midamerica Bancorp, the $1.4 billion-asset parent of Bank of Louisville, said Wednesday that it has reached a settlement in a lawsuit against Phoenix-based Viad Corp., the present owner of Moneygram Payment Systems Inc.
Moneygram bought Midamerica Money Order Co. in January of last year. At that time, Moneygram entered into a four-year contract for the banking company to keep providing data processing for Midamerica Money Order.
This arrangement was short-lived, however. In June, Moneygram was sold to Viad's Travelers Express Co. unit. Travelers Express, which handled its data processing in-house, canceled the contract with Midamerica.
Midamerica sued last summer in Jefferson County (Ky.) Circuit Court, claiming breach of contract. Viad countersued in U.S. District Court for the Southern District of New York.
Under terms of the settlement announced this week, Viad will pay Midamerica $2.1 million in cash.
The banking company also will continue processing some money orders for Moneygram through May and retain a license on the software it developed.
John T. Rippy, senior vice president and general counsel at Midamerica, said the settlement amounted to less than the contract would have brought over four years, but he would not say how much less.
Still, he said, the settlement is a good deal for the company.
"We are freeing ourselves of the litigation, and we get the money now instead of over a longer period," he explained.
The settlement will not be recorded in Midamerica's books until the end of May, when Midamerica finishes working for Travelers Express, Mr. Rippy said.